our firm is contemplating the purchase of a new $530,000 computer-based order entry system. The system will be depreciated straight-line to zero over its 7-year life. It will be worth $75,000 at the end of that time. You will save $185,000 before taxes per year in order processing costs, and you will be able to reduce working capital by $50,000 at the beginning of the project. Working capital will revert back to normal at the end of the project. If the tax rate is 25 percent, what is the IRR for this project? (Do not round intermediate calculations and enter your answer as a percent rounded to 2 decimal places, e.g., 32.16.)
our firm is contemplating the purchase of a new $530,000 computer-based order entry system. The system will be depreciated straight-line to zero over its 7-year life. It will be worth $75,000 at the end of that time. You will save $185,000 before taxes per year in order processing costs, and you will be able to reduce working capital by $50,000 at the beginning of the project. Working capital will revert back to normal at the end of the project. If the tax rate is 25 percent, what is the IRR for this project? (Do not round intermediate calculations and enter your answer as a percent rounded to 2 decimal places, e.g., 32.16.)
Chapter9: Capital Budgeting And Cash Flow Analysis
Section: Chapter Questions
Problem 9P
Related questions
Question
Your firm is contemplating the purchase of a new $530,000 computer-based order entry system. The system will be
Expert Solution
This question has been solved!
Explore an expertly crafted, step-by-step solution for a thorough understanding of key concepts.
Step by step
Solved in 3 steps with 2 images
Knowledge Booster
Learn more about
Need a deep-dive on the concept behind this application? Look no further. Learn more about this topic, accounting and related others by exploring similar questions and additional content below.Recommended textbooks for you
EBK CONTEMPORARY FINANCIAL MANAGEMENT
Finance
ISBN:
9781337514835
Author:
MOYER
Publisher:
CENGAGE LEARNING - CONSIGNMENT
Cornerstones of Cost Management (Cornerstones Ser…
Accounting
ISBN:
9781305970663
Author:
Don R. Hansen, Maryanne M. Mowen
Publisher:
Cengage Learning
Principles of Accounting Volume 2
Accounting
ISBN:
9781947172609
Author:
OpenStax
Publisher:
OpenStax College
EBK CONTEMPORARY FINANCIAL MANAGEMENT
Finance
ISBN:
9781337514835
Author:
MOYER
Publisher:
CENGAGE LEARNING - CONSIGNMENT
Cornerstones of Cost Management (Cornerstones Ser…
Accounting
ISBN:
9781305970663
Author:
Don R. Hansen, Maryanne M. Mowen
Publisher:
Cengage Learning
Principles of Accounting Volume 2
Accounting
ISBN:
9781947172609
Author:
OpenStax
Publisher:
OpenStax College
Excel Applications for Accounting Principles
Accounting
ISBN:
9781111581565
Author:
Gaylord N. Smith
Publisher:
Cengage Learning
Intermediate Financial Management (MindTap Course…
Finance
ISBN:
9781337395083
Author:
Eugene F. Brigham, Phillip R. Daves
Publisher:
Cengage Learning